401(k) Stories

About the 401(k) Stories section:

The days when RIAs were the outsiders at the 401(k) party are fast coming to a close. What's new is that the mass of 401(k) assets
is getting critical at about $3 trillion; fiduciary advisors are getting appreciated; fat fees and questionable kickbacks are getting exposed and stepping out of line is getting dicier as the Department of Labor tightens the regulatory screws.

The old reasons why the 401(k) business is attractive are still in place: there are fresh assets pouring in every month and when employees leave jobs or retire, they produce rollovers that build up IRA accounts for financial advisors. The drawbacks of getting into the 401(k) business are still in place, too. Dealing with retirement assets is really a second line of business and it remains -- unless you overcharge with hidden fees -- a low margin business with high potential fiduciary liabilities.

Still, the outsourcers, infrastructure and accumulated knowledge for RIAs to capitalize on is growing daily and a the mega-shift of assets away from brokers is making the 401(k) business riskier and riskier -- to ignore.

The Obama administration is taking no guff from Wall Street this time

Brooke’s Note: Commissions, 12(b)-1 fees and even kickbacks known as revenue sharing are all still allowed. But the SIFMA/FSI/FINRA crowd is wailing. They are expressing pain over a clause that made its way officially today into the new federal definition of “fiduciary” — namely that customer interests get put ahead of product providers. SIFMA has a good response — that putting client interests first will hurt clients. Steve Winks tackles that issue point for point below. The fiduciary ball is rolling, on a parallel course with progress on Cuba and that tells you something. Here’s what Secretary of Labor Tom Perez and Jeff Zients, director of the National Economic Council and assistant to the president for economic policy, have to say.

Today, we are taking the next step in President Obama’s historic push for the strongest consumer protections in America’s history. As the president called for in February, the Department of Labor is proposing to update rules to protect Americans saving for retirement and crack down on conflicts of interest in retirement advice that are costing middle class and working families billions of dollars ...

After cleaning up his compliance act with an LPL assist, the head of Independent Financial Partners is fighting back

Brooke’s Note: Business is hard because ultimately nothing can be controlled. If customers, employees, affiliates or vendors want to leave you, they can pretty much do so at will in a free enterprise system. I am aware you can stop reading this article right now and never come back to RIABiz. But business owners persist in this atmosphere of uncertainty because is they know from experience that if they keep going to the best of their ability, good things can and generally do. Bill Hamm’s case is a good case in point.

In the RIA business, it’s not so much about getting knocked down, it’s about how you scramble to your feet.

Just ask Bill Hamm.

The chief executive of Independent Financial Partners has enjoyed some tremendous success in building a giant RIA by affiliating his firm with LPL Financial as an office of supervisory jurisdiction.

The Raleigh, N.C.-based firm's willingness to buy 49% reduces 'weird' and may set the stage for life as more of a 401(k) franchisor

Brooke’s Note: For RIA roll-ups, it looks like rolling a boulder uphill. Scale doesn’t always confer benefits at the same pace as it eradicates them for advisors managing the personal wealth of high-net-worth individuals. With 401(k)s, now a green pasture for RIAs in light of DOL changes in the works, the roll-up game may work much differently. Scale matters because every penny of profit makes a difference in this slim-margin business. But how do you combine these firms rapidly enough to keep pace with the mega-401(k) giants like Empower or Fidelity? This article shows that the biggest 401(k) roll-up out there is coming at the challenge with a flexible — and aggressive — approach.

Fielding Miller faced a brutal choice between power and control as he pondered how to add the next $160 billion of assets under advisory to his 401(k)-specialized $160-billion RIA. The chief executive of Raleigh, N.C.-based CAPTRUST Financial Advisors made his firm a giant in its class by meticulously managing its systems and culture. Miller, however, recognized many deals didn’t comport with his preference for total control.

After a lot of waiting around FSI calls this news 'the real thing'

Brooke’s Note: It’s coming at a time of other Obama political Hail Mary passes that might just get results: Opening relations with Cuba, closing Guantanamo, reforming immigration and setting aside land for national parks that frackers want to drill. Right up there on that besta-luck list is having rules requiring financial advisors to authentically put their clients first. But guess what, President Obama is giving it a go and talking in almost NAPFA-like parlance.

“There are a whole lot of financial advisors that do put their clients first. There are a whole lot of hard working men and women in the field who got into the field to help people.”

Those words were not spoken by Ron Rhoades, Harold Evensky or Knut Rostad.

The White House’s message to advisors — RIAs and broker-dealers alike — is that their days of charging gratuitous fees and steep commissions in 401(k) plans and individual retirement accounts will no longer be swept under the Oval Office rug.

The godfather of the 401(k) business says the glory days of conferences are winding down -- and tells why he chose not to sell the conference

Lisa’s Note: The first time I covered a Center for Due Diligence conference nearly eight years ago, it was clear that it was different than any other conference I’d ever attended. A big reason was the conductor of these conferences – Phil Chiricotti. It starts with almost carnival-like, sporting themes such as Harley Davidson, NASCAR, Country Western and Elvis. Chiricotti offered big giveaways to advisors such as a five-night stay at a Las Vegas hotel. He cajoles vendors into be just as flamboyant. It wasn’t unusual to walk in the CFDD vendor hall and get your picture taken with a giant snake or crocodile. As odd as they were, these conferences attracted powerhouse leaders of the retirement industry and refreshing debate. Thanks to Chiricotti’s relentless constitution, I quickly learned it was normal to get a dozen e-mails from Chiricotti in one day (with many of them arriving during my REM sleep in the middle of the night). Chiricotti engineers every retirement session with meticulous details months before the conference. He doesn’t take no for an answer when he’s trying to hustle up speakers. But once ...

Brooke’s Note: Envestnet became a $1.7-billion market-cap public company because it saw a fiduciary gap and filled it with a straightforward solution. That gap was a world of IBD reps that wanted to go fee-only but needed a way to do it without the complications of forming their own RIA and leaving their broker-dealers. It also needed to tap into a world of investment managers that covered them for “open architecture.” Envestnet was able to create a great big central repository of separate account managers for these IBD reps and, in a sense, they became instant fiduciaries by availing themselves of Envestnet. Now it appears that Envestnet is going to use a very similar blueprint for assisting financial advisors in jumping into the 401(k) business — or simply doing defined contribution business in a simpler way. But, of course, second acts are always easier said than done. Right now, two 401(k) “TAMPs” are Loring Ward and Buckingham Asset Management.

Envestnet is jumping into the 401(k) business.

The Chicago-based TAMP is entering the $5-trillion realm with a startup RIA called Envestnet Retirement Solutions, and HighTower Advisors LLC ...

Bob Reynolds delivers quick response to the question of whether a branded company will swallow his new brand

Brooke’s Note: There’s a strong urban myth that anyone who went to Harvard University will bring that fact up within five minutes of you meeting them for the first time. My experience: it might actually be true. But I have also noticed that people who own Apple devices will bring up the fact within four minutes of embarking on any conversation involving business, brand, communication or technology. Interbrand places a value on Apple’s brand alone of $118 billion. There is a reason for all this love. Apple, with its market cap of $668 billion (the Russian stock market’s market cap is $550 billion) is that company that has — in unmatched fashion — connected two intuitively unconnectable things: culture and technology. So the reason we bring up our [figuratively speaking] Harvard legacies and Apple product ownership is a little complicated. We want to express our humanity and we also want to express that underneath all that karma is a Swiss watch, a smooth-functioning thing of hard value that deserves respect, maybe awe. So this Apple appreciation is warm-up to why winning the Apple account is a coup for ...

The Chicago-based roll-up is angling for retirement rollover dollars but observers question how determined it is to become a serious player in the lurcrative sector

Brooke’s Note: Baltimore people love their town and financial executives like the better employers there even more. Truly, if you live in Roland Park, send your kids to Schools like Gilman and Garrison Forest and toodle downtown to a desk at (DB) Alex. Brown, Legg Mason or T. Rowe Price, life is good. With that in mind, I took note of a couple of true blue T. Rowe guys ending up with the very Chicago HighTower Advisors, just another interesting case of hybrid vigor and of the 401(k) business reconstituting itself in unforeseeable ways.

Small and midsized RIAs must factor in where the fiduciary buck stops, identify profit margins and be prepared to grapple with a six-foot stack of ERISA regs -- but the rewards are potentially great

Brooke’s Note: We went into this webinar (sponsored by The Hartford Funds — thank you) with the bias that RIAs should err on the side of advising 401(k) plans and/or their participants. I still think that’s the case. It’s a monster, underserved market, growing fast and there for the taking, especially by advisers accustomed to acting as fiduciaries. See: How RIAs can rule the 401(k) realm by becoming advocates for plan sponsors — and start by eliminating eight marketplace conflicts. But after hearing what these experts in the field had to say, I also better realize the level of knowledge and commitment involved in making a good 401(k) business work. We hope this transcript makes the conversation accessible to people who weren’t able to attend, and makes for a good reread for those who listened in.

LISA SHIDLER: Greetings everyone and welcome to our webinar, “To 401(k) or not to 401(k): That’s Not the Only Question RIAs Must Answer.”

First, opening remarks by Rick Meigs, who is going to help set the context for the discussion around RIAs entering the 401 ...

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